Liberty Retail Revolution Ltd
Liberty's retail chain has about 80 stores across India, selling fashion footwear. In the first year, it improved the store inventory cover from 10 months to five months, while increasing sales by 30%. The released capital was used to add 30 stores to the existing 50. The company will have another 20% growth in 2011-12 without infusion of capital.
We were at flat sales and low profits before we started the TOC journey. Now, we are seeing increasing sales growth and profits.
A: Liberty Retail Revolutions: We used to follow a ‘twice a year’ booking system, as directed by our plants. The retail chain had to forecast and place confirmed orders for six months at a time. Obviously, the errors were high, resulting in stock outs, surpluses and markdowns. We had stock turns of 1.5 to two for our retail chain. Discounting was at 14 percent.
A: Liberty Retail Revolutions: We designed the supply chain to deal separately with continuous selling items and new introductions. For the continuous selling items, we moved away from six month confirmed booking system to pull based replenishment from a central warehouse. We also decided to sell and dispatch shoes in cut sizes and not in full size rolls. Shoes were dispatched based on consumption from stores. New products were introduced more frequently and in smaller lots. We are controlling range at nearly 60 percent of that held previously.
A: Liberty Retail Revolutions: The challenge was in shifting from booking orders to a replenishment system, and in frequent new product introduction. Buyers had to be dissuaded from ordering in large quantities, and convinced to let the system manage the replenishment on its own. The other one was to change the production mindset from expecting large ‘confirmed’ orders to delivering small lots as per consumption. Continuous handholding by Vector helped.